* Dollar pressured by doubts about Fed rate hike outlook
* Euro rises as ECB seen normalizing rate policy
* Yen rises vs dollar
(Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 2 (Reuters) - The dollar dropped on Tuesday to
its lowest in more than three months, weighed down on the first
trading day of 2018 by expectations of a slower pace of interest
rate increases by the Federal Reserve amid a tepid U.S.
The dollar's decline extended its underperformance in 2017,
which saw the greenback post its weakest annual performance in
"Investors remain skeptical about the Fed's outlook for
three additional interest rate increases this year, especially
given the extremely benign inflation backdrop in the U.S.," said
Omer Esiner, chief market analyst, at Commonwealth Foreign
Exchange in Washington.
The dollar's upside was also capped, as major central banks
such as the Bank of England and European Central Bank are moving
toward normalizing their own monetary policies.
The dollar index hit a 3-1/2-month trough of 91.751 and was
last down 0.3 percent at 91.887. For 2017, the dollar
index slid more than 9.8 percent, its weakest since 2003.
"Any further drop below 91.00 would confirm a continuation
of the dollar's bearish trend from the beginning of 2017, with
the next major downside target around the 90.00 psychological
support level," said James Chen, head of research at Forex.com
in Bedminster, New Jersey.
The euro, meanwhile, has been on a tear especially since the
second half of last year on optimism over a brightening euro
zone economic picture.
In 2017, the euro had its strongest yearly showing against
the dollar since 2003 as European economies strengthened and
expectations grew the ECB will wind down monetary stimulus.
The euro rose to start the new year, climbing to a
nearly four-month high of $1.2082. It was last up 0.3 percent at
Euro zone manufacturers ended 2017 by ramping up activity at
the fastest pace in more than two decades, a survey showed on
Tuesday, and rising demand suggests they will start the new year
on a high.
Also boosting the euro was a comment from an ECB official
over the weekend. The ECB's Benoit Coeure said he saw a
"reasonable chance" the bank's bond purchases would not be
extended beyond September.
Against the yen, the dollar fell 0.4 percent to 112.32
. The yen continues to benefit from last week's release of
the Bank of Japan's minutes of its meeting.
The minutes showed some members are considering tightening
monetary policy if the economy continues to improve next year,
which would be a significant shift in strategy for a central
bank thought to be the last to exit easier monetary policies.
Currency bid prices at 2:50PM (1950 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar EUR= $1.2050 $1.2008 +0.35% +0.45% +1.2082 +1.2002
Dollar/Yen JPY= 112.3100 112.6400 -0.29% -0.32% +112.7800 +112.0600
Euro/Yen EURJPY= 135.35 135.20 +0.11% +0.13% +135.6100 +134.9400
Dollar/Swiss CHF= 0.9719 0.9743 -0.25% -0.25% +0.9748 +0.9700
Sterling/Dollar GBP= 1.3593 1.3501 +0.68% +0.60% +1.3599 +1.3503
Dollar/Canadian CAD= 1.2501 1.2542 -0.33% -0.60% +1.2558 +1.2500
Australian/Doll AUD= 0.7830 0.7803 +0.35% +0.37% +0.7844 +0.7796
Euro/Swiss EURCHF= 1.1715 1.1704 +0.09% +0.22% +1.1727 +1.1692
Euro/Sterling EURGBP= 0.8863 0.8876 -0.15% -0.23% +0.8918 +0.8859
NZ NZD= 0.7108 0.7104 +0.06% +0.31% +0.7130 +0.7084
Dollar/Norway NOK= 8.1173 8.1964 -0.97% -1.09% +8.1976 +8.0955
Euro/Norway EURNOK= 9.7856 9.8399 -0.55% -0.64% +9.8481 +9.7659
Dollar/Sweden SEK= 8.1664 8.2012 +0.02% -0.43% +8.2017 +8.1306
Euro/Sweden EURSEK= 9.8401 9.8386 +0.02% +0.01% +9.8623 +9.8085
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Tommy Wilkes in London; Editing by David Gregorio and Chizu
First Published: 2018-01-02 07:46:40
Updated 2018-01-02 22:11:37
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